Blue-Chip Stocks Close Slightly Lower, Industrials Weigh

StevenRussolillo

NEW YORK (MarketWatch) -- Blue-chip stocks closed slightly lower Thursday despite a large drop in weekly jobless claims as investors grew more hesitant ahead of the Federal Reserve's meeting next week.

The Dow Jones Industrial Average closed down 12.33 points, or 0.11%, to 11113.95, its second straight day of declines. 3M was the blue-chip index's worst performer, sliding 5.85, or 6.5%, to 84.52 after the consumer and industrial manufacturer narrowed its 2010 profit target.

Also weighing on the Dow were Caterpillar, which fell 48 cents, or 0.6%, to 77.74 and Cisco Systems, which finished down 10 cents, or 0.4%, to 23.19.

Meanwhile, Exxon Mobil gained 55 cents, or 0.8%, to 66.22, after its third-quarter earnings rose a bigger-than-expected 55%. The oil giant benefited from stronger commodities prices and refining margins in the first full quarter that included its June acquisition of natural-gas producer XTO Energy.

"There's an old statement that 'all great climbers must rest,'" said Todd Morgan, senior managing director at Bel Air Investment Advisors. "This market needs to digest the terrific rise it's had over the last month and a half. This is healthy. Nothing goes straight up forever."

The Dow's losses followed Wednesday's 43-point drop. Stocks have surged over the last few months, but investors are starting to fret over the scope and potential for another round of quantitative easing by the Federal Reserve. The central bank is expected to announce another round of bond buying at its meeting next week.

"It feels like the market's struggling to maintain its momentum," said Bruce McCain, chief investment strategist at Key Private Bank. He added investors appear to be re-evaluating the impact another round of quantitative easing, known as QE2, will have on the overall economy. "[Investors] have been inclined to look at the positive side of QE2, but with businesses unwilling to borrow and other problems in the system that have led to lower lending, the Fed may be largely pushing on a string."

The Standard & Poor's 500-stock index edged up 1.29 points, or 0.11%, to 1183.74, as the health-care and consumer-discretionary sectors led the gains. The broad index has posted gains in six of the last seven sessions.

The technology-oriented Nasdaq Composite gained 4.11 points, or 0.16%, to 2507.37, and has risen in 14 of the last 16 sessions.

Thursday's mixed results among the benchmark indexes occurred despite a better-than-expected reading on the labor market. Initial unemployment claims declined by 21,000, to 434,000, in the week ended Saturday, the Labor Department said. That brings claims down to levels last seen since the week ended July 10.

Economists surveyed by Dow Jones Newswires had expected claims would rise by 3,000.

Additionally, manufacturing activity in the Federal Reserve Bank of Kansas City's district continued to expand in October but at a slower rate than in September, according to a report released by the bank Thursday.

The Kansas City Fed's manufacturing-production index, in a month-over-month comparison, slowed to 10 this month from 14 in September but was up from zero in August. Readings above zero denote expansion.

Among companies that reported earnings, Dow Chemical fell 35 cents, or 1.1%, to 30.86, after the chemicals company reported a 25% drop in third-quarter profit because of the impact from divestitures.

Las Vegas Sands swung to a third-quarter profit. The company posted record revenue resulting from strong growth at its casinos in the China gambling enclave of Macau and the first full quarter of operations at its Singapore casino. Shares jumped 3.57, or 8.7%, to 44.63.

Motorola's third-quarter profit soared as the speedy release of new smartphones using Google's Android software propelled the mobile-devices unit to its first operating profit in more than three years. Shares rose four cents, or 0.5%, to 8.13.

In the currency markets, the dollar weakened against both the euro and the yen. The euro traded recently at $1.3927, up from $1.3768 late Wednesday in New York. The U.S. Dollar Index, which tracks the currency against a basket of six others, fell 1.1%.

Demand for Treasurys rose, pushing the yield on the 10-year note down to 2.67%. Comex gold for November delivery gained 1.5% to settle at $1,342.10 per troy ounce and crude-oil prices edged up 24 cents, or 0.3%, to $82.18 a barrel.

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